In line with the Oman Vision 2040, the Muscat Stock Exchange (MSX) introduced its Environmental, Social and Governance (ESG) disclosure guidelines for public joint stock companies (i.e. S.A.O.G.) (ESG Disclosure Guidelines). The aim of the ESG Disclosure Guidelines is to assist all SAOG companies listed on the MSX to report on their ESG performance, which helps communicate companies' commitments to sustainable growth and related activities to its key stakeholders, investors and overall community.
Public companies listed on MSX are encouraged to voluntarily report in 2024, their 2023 activities based on 30 ESG metrics. Reporting on 2024 activities will be mandatory starting 2025, and the first mandatory reports are required to be filed by 31 March 2025.
Evolving Landscape of ESG Reporting in Oman
In September 2021, the government of Oman announced that it is developing an ESG framework to attract foreign direct investment and to widen its funding base. Following that, the Central Bank of Oman (CBO) had also issued a circular to banks on mandatory compliance with climate change reporting and sustainability. The Capital Markets Authority of Oman has also been demonstrating its commitment to ESG reporting guidelines for public companies listed on MSX, which aims to evaluate a company's commitment to sustainability.
Notably, the ESG Disclosure Guidelines issued by MSX sets the stage for key players in Oman as it is the first market player in the Sultanate to issue detailed ESG guidelines with 30 ESG metrics to align with various regional and global recommendations.
In January 2024, the Ministry of Finance has launched the Sustainable Finance Framework under which it intends to issue green, social and sustainability bonds, loans or sukuk for investments in projects that deliver environmental and/or social benefits. The framework is intended to be in alignment with the International Capital Market Association (ICMA) Green Bond Principles 2021 (with the June 2022 Appendix I), the ICMA Social Bond Principles 2023, the ICMA Sustainability Bond Guidelines 2021, the Loan Market Association (LMA) Green Loan Principles 2023 and the LMA Social Loan Principles.
Global and Regional Alignments
The ESG Disclosure Guideline is in alignment with the Gulf Cooperation Council (GCC) ESG Disclosure Metrics for Listed Companies published in 2022, which is particularly helpful for companies who have existing footprint and presence within the GCC region. The publication of this ESG Disclosure Guidelines is also a natural step towards a sustainable and inclusive financial culture since the MSX joined the UN Sustainable Stock Exchange (SSE) initiative in March 2022.
The 30 ESG metrics set out in the ESG Disclosure Guidelines are also in line with the recommendations of the SSE initiative and the World Federation of Exchanges.
How ESG Reporting Helps Your Business?
ESG are non-financial factors that are used to identify material risks and growth opportunities of a company, and the way in which these issues converge to affect the company and its stakeholders.
By reporting on ESG practices, companies could attract investors who prioritise ESG considerations in making their investments. Companies could also benefit from tracking its growth against relevant ESG metrics to identify, prioritise and manage material sustainability matters so that it can focus on what is important to its stakeholders and create long term value, which in turn boosts investor confidence.
Key Reporting Considerations under MSX's ESG Disclosure Guidelines
A few key considerations that public listed companies should keep in mind when reporting under the ESG Disclosure Guidelines are:
- Stakeholder engagement and materiality – to provide information on types of stakeholder groups engaged, and how their concerns and expectations were considered. The report should include explanation on the criteria used to select certain ESG topics, how the materiality exercise was conducted and time frame selected. MSX's ESG Disclosure Guidelines lists few non-exhaustive examples of ESG themes commonly covered across various industries.
- Reporting boundaries – to identify and determine scope of disclosure, reporting period, list of entities included and countries included. The MSX requires the reporting period to be based on the company's fiscal year.
- Exercising balance – to provide a balance of quantitative and qualitative information, and include information on positive performance as well as challenges faced that may be perceived negatively.
- Providing benchmarks – to provide a comparison point against the first report, and provide adequate explanation to performance changes.
- Mandatory standard, format and metrics – to publish stand-alone ESG reports in alignment with the Global Reporting Initiative (GRI) Universal Standards, as a separate report from the annual report. The stand-alone ESG reports must be accessible on the company's website, and the 30 metrics which should be included in the report are set out in the ESG Disclosure Guidelines.
- Mandatory vs voluntary reporting period – see below.
To facilitate the reporting process, MSX has launched a dedicated MSX ESG Disclosures Platform on its website to assist public listed companies in Oman with their reporting obligations.
The ESG Disclosure Guidelines also sets out the types of disclosures and whether they are voluntary or mandatory. In summary, ESG disclosures (whether by responding to the 30 ESG metrics on MSX's platform or by publishing a stand-alone ESG report) are voluntary for 2024 publication on activities performed in 2023. However, disclosure on 2024 activities is mandatory and should be uploaded to MSX's platform no later than 31 March 2025. Publication of stand-alone ESG reports is also mandatory and should be made available on the respective company's website by 31 March 2025.
Thereafter, annual disclosures on MSX's platform and annual stand-alone ESG reports showcasing the companies' performance of the previous fiscal year must be submitted/ published by 31 March following the end of that fiscal year.
The ESG Disclosure Guidelines will be updated regularly to meet the developing nature of the Oman market.
What's Next?
In summary, the private sector and especially listed companies plays a pivotal role towards realising Oman Vision 2040 and driving the economy and development pillars. The MSX publishing the ESG Guidelines is a noteworthy development towards the right direction for further harmonisation of sustainable practices. It will be interesting to see how the MSX ESG Disclosure Guidelines are practically implemented in Oman in the years to come.
As a firm well-versed with the Omani market and regulatory framework, our local experts are well placed to guide businesses on the way forward in their ESG compliance journey. Please get in touch with our Oman team for further information.
